Dombrovskis claims that the EU could avoid a technical recession

(Bloomberg). — As gas prices fall and the recovery fund spending feeds into an economy, the European Union could avoid recession this year, Valdis Dombrovskis, Vice President of Commission, told Bloomberg TV.

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“Since autumn we have seen some positive signs,” Dombrovskis said in Brussels on Wednesday. Energy prices are “lower than previously expected because our gas storages were full at the beginning of the winter” and the weather has been relatively mild, he added.

Dombrovskis also pointed to a price cap on Russian oil, and the EU’s crisis response including its recovery plan helping the economies of member states. “So indeed we are expecting shallower economic contraction around the turn of the year than it was expected previously, maybe we can also escape this technical recession,” he said.

German Chancellor Olaf Scholz told Bloomberg on Tuesday he’s sure Europe’s biggest economy will avoid a recession this year, offering reassurance for Europe’s largest economy as it faces down Russia’s energy squeeze. Scholz indicated that Germany is now in a much better place than it was just a few weeks ago. Scholz also stated that diversifying gas supplies has been crucial in keeping the economy afloat.

Dombrovskis said inflation “seems to have peaked, it has come down markedly in December” but he noted that “the core inflation remains still elevated, so yes there are positive signs but we need to stay vigilant.”

Dombrovskis met with US Trade Representative Katherine Tai on Tuesday to discuss European concerns over President Joe Biden’s $369 billion dollar (€340 billion) climate bill. The EU stated that some provisions of it may be contrary to the World Trade Organization’s rules because it grants tax breaks and subsidy for electric vehicle production only to US-based companies.

“There are some openings from the US side but we really need to make sure we produce concrete results,” Dombrovskis said of discussions on the US Inflation Reduction Act. He stated that additional work is needed to address issues such as clean vehicle subsidies and batteries, as well critical minerals.

Ursula von der Leyen, president of the European Commission, presented a Green Deal Industrial plan to boost European competitiveness, avoid job loss, and increase investment. The initiative would simplify the rules for state aid to support clean transition. It would also include tax breaks to help support businesses within the bloc.

Continue reading: Von der Leyen argues that the EU must increase industry aid in order to compete with the US

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